6/07/2010 @ 12:00AM

Users: Billions. Profits? Maybe.

After 600 million downloads of its free software, “Skype” is ready to join “
Google
” in the dictionary as a verb. Meaning: to have a computer video chat, totally free, anywhere in the world, more likely than not involving grandchildren living too far away to visit in person.

For students of the technology business, “to Skype” may help answer the Facebook question, which still haunts the technology world: What is something that can’t make a lot of money, despite being wildly popular?

While Skype certainly doesn’t put it this way, its software solves the easiest part of the problem of allowing two computer owners to have a picturephone talk. The difficult part is the hardware: Each machine must have a Webcam, a microphone and a broadband connection. When two people are Skyping each other, Skype isn’t involved in any way; in fact, the company doesn’t even know the interaction is taking place.

Just about every modern Internet chat program has the same basic audio- and videoconferencing features, though Skype brags that it better handles the little things, so grandmothers of the world find it easy to use. (The software has a winsome interface that even my mother has learned to master.)

Skype was introduced in 2003; two years later Ebay paid $2.6 billion for it. After much crow-eating, in the form of a $900 million writedown, the auction company last year sold a majority share to a group of private investors. Some messy lawsuits involving patents have since been settled, and Skype’s new owners are busy building the company.

Skype was initially limited to audio, and it first became popular overseas, since it allowed free phone calls. When it added video it began to take off in the U.S., which Skype Chief Executive Joshua Silverman somewhat facetiously says is still an “emerging market” for him.

The company is pursuing a variation of the “freemium” model that is all over the Web right now. Skype has 700 employees, many of them engineers. It spends virtually nothing acquiring its customers and nothing at all once those customers begin using the product.

It can, though, sell them other services, which it did in its last fiscal year to the tune of $719 million. These include the ability to connect to non-Skype telephone users. The company also plans new kinds of enhanced services, like the ability for several Skype users to see one another at once in an online meeting.

“We are very happy to give away Skype,” says Silverman. His ambition, however, is a grand one: to become nothing less than “the fabric for real-time communication on the Internet.”

But that is where the Facebook question needs to get asked. Revenue of $719 million isn’t bad, but is hardly remarkable when your product is used by hundreds of millions of people.

Technologies like Skype are so disruptive, as they say in business school, that they tend to destroy the very economics of their own business. Thanks to Skype and its many imitators–every Web chat program now has audio and video built in–there is no money to be made in computer-to-computer communications, certainly not between homes.

Skype is trying to move up the value chain, to the intersection of computers and traditional telephones as well as to various forms of Web conferencing. But so many people are up to the same thing–Google included, at some point–that it’s hard to see how those businesses won’t soon have the value sucked out of them as well.

The irony stares you in the face, just like a Webcam. Silverman brags, entirely correctly, that Skype is ushering in an entirely new form of “ambient communications.” There are soldiers in Iraq, he says, who Skype with their family in the evening, both sides virtually puttering around, doing the same sort of nothing in particular, that they would be doing if they were together physically.

tv manufacturers know this is going on. Many of them are adding Skype software to their sets, so that you won’t even need to drag out a laptop to start a session. It’s Skype’s hope that people won’t spend all their time talking about how no one but Google seems to be able to make any money online anymore.